How an India-Japan alliance can help counter Chinese dominance

Japan is now being pushed to a leadership role in Asia following the election of Donald Trump as US President

India's Act East policy has an obvious dilemma — China. How does India cope with the position of strength it occupies in the ASEAN and beyond and the unfolding of the Belt and Road Initiative? China’s trade is more than five times that of India. Further, China has important leverages with most ASEAN countries because of its pole position in the South China Sea and as an upper riparian of the Mekong river.

The answer that is emerging is: a partnership with Japan. Over the decades, Japan has built up huge equities in Southeast Asia. This is through its official Overseas Development Assistance (ODA) loans and grants, Japanese private sector investment, as well as the activities of the Japan-led Asian Development Bank (ADB). Typical of the Japanese, their approach has been low key and emphasised developmental and economic goals over geopolitics.

Investments

However, Japan is now being pushed to a leadership role in Asia following the election of Donald Trump as US President. His pull-out from the Trans-Pacific Partnership (TPP) undermined the economic basis of the biggest planned pushback against China’s expanding footprint in the region. So Japan took the initiative to revive the gathering minus the US. Further, it has announced several measures to promote the construction of “quality” infrastructure, an obvious dig at the flaws in many Chinese projects.

At a side event at the UNGA meeting in New York in September 2017, Kentaro Sonoura, special adviser to the Japanese PM, outlined his country’s initiatives for promoting “quality infrastructure investment”. He announced that Japan would boost the $110 billion (Rs 7,06,434 crore) fund it had created in 2015 for a five year period in Asia, to a sum of $200 billion (Rs 12,84,426 crore) that would be offered for the same period, but globally. In addition, Japan’s concessionary yen loans had been doubled to 2 trillion yen (Rs 1.18 lakh crore) since 2015. This would provide access to large sums of financing for economic and social projects on terms more favourable than the market.

Japan has been a huge economic presence in the region for decades and a major factor in its prosperity. The attraction of ASEAN region for Japan has only grown in recent years as Japanese businesses have faced difficulties in operating in China. More important, perhaps, is the fact that wages in many ASEAN countries are lower than those in China. So observers note there is a transfer of Japanese firms from China to the ASEAN region.

In 2014 and 2015 Japanese FDI to the region has steadily grown, and is usually more than double of that of China. Japan has long led the Manila-headquartered Asian Development Bank to aid development of the Asian region. It offers money at near-market terms to lower to middle-income countries and at very low-interest rates to lower income countries.

Transport corridors

Besides Japanese governmental initiatives, the ADB is itself making moves to counter the power of China’s Belt and Road Initiative. With the help of the Japan International Cooperation Agency (JICA), the ADB has created Leading Asia’s Private Sector Infrastructure Fund (LEAP) in 2016 with the aim of leverage and complementing money to non-governmental projects which can range from public-private partnerships to joint ventures and project finance. The focus is to be on energy, water, transport and health.

There are a number of connectivity schemes unfolding in the ASEAN region and the Japanese, whether through ADB or their ODA, have been playing a significant role. For example, the EastWest Economic Corridor funded by ADB is creating a road transport corridor linking Da Nang port in Vietnam with north-east Thailand through Laos. A southern economic corridor links Bangkok with Ho Chi Minh City and the port of Vung Tao through Cambodia. There are several such ongoing projects.

In India

The Japanese have been active in connectivity projects in India such as the Delhi-Mumbai Industrial Corridor and have recently begun funding road construction in the Northeast, emphasising linkages to Myanmar and Bangladesh and are studying the feasibility of the Chennai-Bengaluru Industrial Corridor.

Indian schemes such as the Kaladan Multimodal Project or the Trilateral Highway to link the Northeast to Thailand via Myanmar are anemic. With the infusion of Japanese money and expertise, we can put some real life into our Act East slogan. India and Japan’s ambitious strategic partnership is not limited in trying to link South and South-east Asia, but make a broad thrust from towards Africa. The Asia-Africa Growth Corridor has a canvas that rivals that of the Chinese BRI stretching as it does from Japan to Southeast and South Asia towards East Africa.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of DailyO.in or the India Today Group. The writers are solely responsible for any claims arising out of the contents of this article.